Answer the following questions using the information below:
Frederick Company is considering replacing a machine.The following data are available:
$\begin{array}{lrr}
&& \text { Replacement } \
&\text { Old Machine } & \text { Machine }\
\text { Original cost } & \$ 45000 & \$ 35000 \
\text { Useful life in years } & 10 & 5 \
\text { Current age in years } & 5 & 0 \
\text { Book value } & \$ 25000 & - \
\text { Disposal value now } & \$ 6000 & - \
\text { Disposal value in 5 years } & 0 & 0 \
\text { Annual cash operating costs } & \$ 6500 & \$ 4000
\end{array}$
-For the decision to keep the old machine,the relevant costs of keeping the old machine total:
A)$72 000
B)$32 500
C)$47 000
D)$60 000

Question

Answer the following questions using the information below:
Frederick Company is considering replacing a machine.The following data are available:
 $\begin{array}{lrr}
&& \text { Replacement } \
&\text { Old Machine } & \text { Machine }\
\text { Original cost } & \$ 45000 & \$ 35000 \
\text { Useful life in years } & 10 & 5 \
\text { Current age in years } & 5 & 0 \
\text { Book value } & \$ 25000 & - \
\text { Disposal value now } & \$ 6000 & - \
\text { Disposal value in 5 years } & 0 & 0 \
\text { Annual cash operating costs } & \$ 6500 & \$ 4000
\end{array}$
-For the decision to keep the old machine,the relevant costs of keeping the old machine total:
A)$72 000
B)$32 500
C)$47 000
D)$60 000

Quizplus · Accepted Answer

The relevant costs of keeping the old machine are the book value of $25,000, the disposal value of $6,000, and the annual cash operating costs of $6,500 for the next 5 years. The total relevant costs are $25,000 + $6,000 + ($6,500 x 5) = $32,500.

Answer the Following Questions Using the Information Below: Frederick Company

Answer the Following Questions Using the Information Below:
Frederick Company